UNDP Clean Development Mechanism (CDM) Experience

Brian DawsonClimate Change Adviser

BDP, New York

October 2004

Overview of Presentation

CDM and UNDP’s Climate Change Strategy

Lessons Learnt State of the CDM market Future Activities and Issues

UNDP and CDM

UNDP has been active in CDM capacity development in recent years Field experience in 11 countries Many lessons learnt Time to reassess and clearly define UNDPs role

UNDP & CDM: Focus

Foussed on creating an ‘Enabling Environment’ DNA, DOE and public-private partnerships

‘Learning by Doing’ capacity development using real projects to build capacity CDM manual provides guidance

UNDP & CDM: Creating an Enabling Environment

Designated National Authorities Establishing an efficient CDM

approval process importantSustainable Development criteriaEfficient processes and proceduresLegal frameworks

UNDP & CDM: Creating an Enabling Environment

Designated Operational Entities and public-private partnerships Largely ignored to date Vital role in CDM process

Transaction costs Engaging industry stakeholders

Overview of UNDP Learning by Doing Capacity Development

Countries South Africa, Morocco, India, Bangladesh, China,

Philippines, Brazil, Peru, Nicaragua, Trinidad &Tobago, Malaysia

Partners National Governments, private sector, UNF, World

Bank, WBCSD, UNIDO, UNCTAD, DANIDA

Lessons Learnt from CDM Activities

CDM is a complex process

High demand and expectations in many developing countries to undertake CDM activities

Identified need for human and institutional capacity building

Significant knowledge and information gap on the CDM Good host country enabling environment is critical for

CDM Clear and transparent approval criteria important

State of the CDM Market

Only a few sectors have approved CDM projects

Landfill gas, biomethanation, some renewables Transport, small scale projects, forestry and energy

efficiency projects face major hurdles Most projects unlikely to be viable in current CDM

market

High transaction costs constrain CDM opportunities

Time consuming approvals process

State of the CDM Market

Low carbon prices constrain economic attractivenessPrices $5-7/tonne but may increase

Market is maturing slowlyKyoto ratification may improve this

Lack of standardised methodologies and project templatesCDM Board reactive and not proactive

CDM Issues and Barriers

Is CDM a real development mechanism?

Not so far Limited technology transfer Limited FDI Minimal impact on MDGs Is it a cost?

What needs to change?

Revisit CDM rules and guidelines ODA Regulatory/sectoral approaches

Standard procedures/methodologies Reduce transaction costs Provisions for small scale projects Development dividend and MDGs

Future Activities on CDM Phase II of UNF project

Country-level capacity development: South Africa, Brazil, Morocco, India, Philippines

Building linkages between relevant stakeholders

Develop a portfolio of projects Assess CDM potential of different sectors Possibly start in 2005

Future Activities on CDM

Information Dissemination and Knowledge Transfer

Document Best Practices and what works Advocacy and analysis Provide realistic guidance and advice to

COs and host countries Clearly define UNDP’s strategy and role

Conclusions

CDM has not yet lived up to expectations

Offers much potential as a development mechanism

but things need to change Kyoto ratification a positive impact

UNDP role needs to be cautious but supportive in capacity development